Friday, May 25, 2012

Booming US solar panel industry captures 3% market share

The Obama green energy economic boom appears to be in full swing, with US solar panel manufacturers capturing a whopping 3% of world market share in 2011. To allegedly protect these vital interests and taxpayer beneficiaries, the administration has slapped a stiff 31% tariff on Chinese solar panels, starting a trade war that now places at risk a $3 billion market annually for US companies that supply and license Chinese manufacturers.

Beijing mounted a spirited response to U.S. efforts to impose tariffs on China's solar-panel industry, with officials accusing Washington of illegally helping its domestic industry and Chinese solar companies teaming up to fight the levies.

China's Commerce Ministry said in a brief statement on Thursday that its investigations of six clean-energy projects in five U.S. states had uncovered violations of international trade law. The announcement, which described the findings as preliminary, didn't offer details or any potential Chinese response.

The Chinese action followed the White House's decision last week to impose 31% tariffs on some solar panels produced in China, alleging they had been sold below cost, or "dumped." Beijing had already termed the tariffs "unjustified" and a reflection of "the U.S.'s tendency toward trade protectionism."

The chief executives of four major Chinese solar-power equipment producers said at a Shanghai news conference Thursday that they had allied to fight Washington's allegations, saying the Chinese industry is beneficial to the U.S. The alliance said U.S. companies are major suppliers to the Chinese industry and that U.S. consumers benefit from the lower prices that result from the industry's concentration and competitiveness.

U.S. trade challenges have prompted Chinese manufacturers to announce tens of millions of dollars in write-downs and sparked worries that the row could increase the chances of a trade war.

The U.S. and China are at loggerheads on other trade issues as well, including over Beijing's tight control of its market for rare-earth elements critical to high-tech manufacturing.

"There's a certain unhealthy development" in the solar-power industry, Miao Liansheng, chief executive of Yingli Green Energy Holding Co., YGE-0.38% said in an interview. He said $2.2 billion in supply deals Yingli signed earlier this year with U.S. companies could be at risk. He opposes retaliation by Beijing, he said.

At risk is a $3 billion market annually for U.S. companies that supply and license Chinese manufacturers, said Sun Guangbin, a top official at the government-backed China Chamber of Commerce for Import and Export of Machinery and Electronic Product, which is sponsoring the group.

Mr. Sun said low solar-equipment prices reflect the Chinese industry's size and efficiencies, as well as difficulties like oversupply and brand piracy, not unprofitable grabs for market share.

U.S.-listed shares of Chinese producers have slumped in recent days, and some of the companies have begun tallying costs associated with Washington policy. Suntech on Wednesday reported a first-quarter loss. The company's revenue dropped by more than half from a year earlier as prices and sales fell. Suntech said it booked $19.2 million in potential costs associated with the U.S. countervailing and antidumping tariffs

Suntech CEO Shi Zhengrong said his company will sustain sales momentum in the U.S. by supplying the market with panels made in other countries. "We have a global supply-chain operation," he said in an interview Thursday. Suntech is "disappointed" by the U.S. action but "fully prepared," he said.

Chinese manufacturers shipped nearly half the world's solar panels last year, representing more than 10,900 megawatts, while U.S. suppliers shipped just 3%, or about 780 megawatts, according to research by Paula Mints, an analyst at Navigant Consulting in Palo Alto, Calif.

U.S. policy isn't the only challenge for China's solar industry. A study published last year by three scholars at George Washington University estimated that Chinese companies will be able to make 38% more product than they can sell this year and predicted that the question of whether Chinese supply and demand can come into balance will depend on the bite of U.S. import policy and installation of the equipment in China.

Shawn Qu, CEO of Ontario-based Canadian Solar, which manufactures in China, suggested that U.S. consumers will face higher prices if the U.S. tariffs hold. "Ultimately it's the off taker, the customer, who pays," he said. The tariffs "will have a significant impact to, not only China-based manufacturers, but to the U.S. solar industry as well."